Stock Market is the bottom in?

[bwoods11]

It would only be a good investment if it was a second home, the taxes are cheap, and you haven't owned it for that long.

 

[Telemark]

You have to live somewhere, why not on the lake. Fun times, the equity has outpaced the interest, taxes and insurance. If I paid even half that much to rent a home, I'd be sick to my stomach. I would only being paying someone else's mortgage?

I'm not opposed to spending money on yourself. Most of my debt is also in a lake house. Most of my equity is in that same house. But I never intend to sell it, so it goes in the liability column.

 

[Bowsnbucks]

You are right, there are no guarantees in any of it, but the broad market is more than speculation. It is always possible to have a historic event, Individual stocks and even sectors can be a gamble, and the broad market can be volatile. However, when you go back and look at the historical data, if your time horizon is long enough, the average returns are fairly predictable. Dollar cost averaging both going in and going out can reduce the risk of buying in all at once. I went back as far as I could with the historical data looking at annual total returns for the broad market. The dips almost never exceed 4 years, so if you can weather a 4 year dip by eating out of a cash bucket, historic returns are likely achievable.

I made some real blunders when I was young trying to "gamble" in the market with individual stocks.

I would say that investing in the broad market is LESS speculation - but not zero. Dollar cost averaging is how I - and then once married, we - have ALWAYS invested, from every paycheck. I invested a chunk more in the '87 crash - which panned out well over the long-term. Also invested extra cash on dips. We can ride out a 4 year dip. Bought a piece of land years ago in cash, and sold it about 2 years later - tripling my investment. I put all that money into investments, and it's still there ............ growing more money. We're very broadly diversified.

You're correct about fairly predictable long-term investment returns over long time horizons. I'm a huge fan of research and info. I've looked at loads of tables, read numerous investment books & subscribed to several money / investment magazines for years. As they say , your brain is the best tool. Two lessons I took to heart way back then was, "Start early - time is your friend. And - dollar cost average."

We've also lived a fairly modest - but happy life. My wife isn't a "shopper" and spender. We haven't done without. We haven't tried to "keep up with the Jones's", bought more home than we needed, and bought expensive vehicles (saved for them so payments were low & short-term!) [ My wife and I view vehicles merely as tools to get us from point "A" to point "B" - not jewelry or status symbols. Neither of us have any interest in Jags, Mercedes, Porches, Hummers, etc. ] F-150 4x4 for me!

I landscaped our property from day one - saving a bundle (about $15,00 back then). I did all the interior painting / finishing and stained woodwork installation, electrical systems, & insulation. It was a shell except for the plumbing. All money saved was invested. That has paid off with investment returns over the years. All dividends and interest have been reinvested and we haven't touched a penny. It helps to have some skills and be hands-on.

 

[Telemark]

Same with the stock market. It's ALL speculation. If some bit of news hits, any given stock - or the whole market - can tumble. Intrinsic value and market value are seldom the same. What's listed as $100 per share today can be at $10 tomorrow. Same buildings, same inventory, same prospects ............... different day.

That's why I've followed Bogle, Buffet, et al for their low-cost, broad diversification strategy. Side bets on good dividend-payers.

Biggest miss all-time for me .......... Amazon when it first came out. Thought about that as a single-stock investment. Woulda, coulda, shoulda. Still in great shape though!! One of my best moves ...... investing with Mutual Shares fund years ago run first by Max Heine, then by his protege Michael Price. THAT MAN made money!!!!!! He specialized in distressed companies, distressed debt, mergers, LBO's, etc. He made the cover of - if I remember correctly - Fortune or Forbes magazine with the cover title of "The Scariest S.O.B. on Wall Street." Michael Price KICKED ASS !!!!!!!!!! One of my actively-managed hits.

Your first statement contradicts the rest. It's not speculation. If you pay attention to Buffett you will hear him say again and again that price vs. Value is exactly how he picks stocks.

 

[S.T.Fanatic]

I will give my house as an example. We bought in 2009 for 128K and put in an additional 25K in new fernace, central air, and finished off the basement (we did all of the work ourselves or by family for low dollar). So we have 158K into the house in 2009. Today, I bet I could sell it in less than a month for $220K. By my calculations that is a $62K profit. Unless you put your brain to work a little bit.

Property taxes for one. Ours are reasonable but after living there for 12 years I can take approx. $19,200 right off of that "profit" figure. That brings us to about $43K. Well if its't our only dwelling and we sell the place that means we are going to have to either buy or build a new home. Unless our 4 children all moved out of the house in the past 12 years that means that we will need to replace it with an equal home. (ours are all still in school) The price to replace our house will easily run 300K and that is If we do much of the work ourself again.

By my calculations it would cost me a pretty penny to sell my house. Doesn't sound like much of an investment to me. Once all of our children are out of the house and we could buy a smaller house then MAYBE it could be looked at as an investment. However by that time if things keep going the way they are it will cost us $220K to buy a 2 bedroom house so where did the profit go?

 

[bwoods11]

ST Fanatic--just giving you a hard time of the Trump Meme. Honestly, I think "the home as an investment" really varies, depends on location and what type of home. Buying scarce lakeshore or even a 10 acre hobby farm might be seen as a home/investment over time. Will it compare to the stock market, maybe not, but I would never choose the alternative (rent) unless I absolutely had to.

 

[Tree Spud]

I'm not opposed to spending money on yourself. Most of my debt is also in a lake house. Most of my equity is in that same house. But I never intend to sell it, so it goes in the liability column.

I am seeing some new accounting math here ... I thought net worth = assets - liabilities

 

[chummer]

Just because it isn’t the best investment (compared to the market) doesn’t mean it isn’t an investment. If you never plan on selling then okay. Everything is for sale to me, camp would be hard to sell but for the right price, bye bye.

 

[chummer]

I am seeing some new accounting math here ... I thought net worth = assets - liabilities

That is the end of the argument...drop the mic.

 

[bwoods11]

The fact that you can own a home for many years (2 year minimum) and sell it at a higher price without paying capital gains is a very powerful tax advantage. Keep that in mind.

 

[Telemark]

I am seeing some new accounting math here ... I thought net worth = assets - liabilities

Net worth is only important when you die. Disposable income is what living people need to maintain their quality of life.

 

[Telemark]

The fact that you can own a home for many years (2 year minimum) and sell it at a higher price without paying capital gains is a very powerful tax advantage. Keep that in mind.

Powerful for people who sell their home.

 

[chummer]

Net worth is only important when you die. Disposable income is what living people need to maintain their quality of life.

That is great to know. What number do I need to get into fairy tale land.

 

[bwoods11]

Net worth is only important when you die. Disposable income is what living people need to maintain their quality of life.

Why do banks ask for net worth on the application for a loan? or insurance companies on an application for life insurance., if net worth is not important?

 

[homerj1]

I always figured a house/land was part of a wealth preservation strategy. Everybody's house is going to sell sooner or later. Either the owner or the owner's heirs will sell it. I suppose the owner's heirs may just keep it, but at some point, somebody's going to sell that house. When it's sold, assuming there is equity in it, there will be wealth acquired at some level.

 

[Telemark]

That is great to know. What number do I need to get into fairy tale land.

No idea. That depends on you.

I don't need more than 60-70k per year.

 

[Telemark]

Why do banks ask for net worth on the application for a loan? or insurance companies on an application for life insurance., if net worth is not important?

Because you asked the bank for a secured loan, and because the insurance company wants to know what you will have when you die.

 

[Tree Spud]

Net worth is only important when you die. Disposable income is what living people need to maintain their quality of life.

Another interesting and unique financial perspective. I have never had a financial planner give me that advice before. For some crazy reason their focus seems to be reduce/eliminate your debt, spend less than you make, save & invest so you build your NW. In theory, the value you build in your NW, is what allows you to be able to retire and maintain your quality of life. It is also what allows you to deal with unplanned issues such as loss of job, health issues, etc.

If you spend what you earn, and don't worry about building your net worth, how do you retire, much less retire and maintain quality of life? What happens when your earning capacity goes down?

 

[Telemark]

Another interesting and unique financial perspective. I have never had a financial planner give me that advice before. For some crazy reason their focus seems to be reduce/eliminate your debt, spend less than you make, save & invest so you build your NW. In theory, the value you build in your NW, is what allows you to be able to retire and maintain your quality of life. It is also what allows you to deal with unplanned issues such as loss of job, health issues, etc.

If you spend what you earn, and don't worry about building your net worth, how do you retire, much less retire and maintain quality of life? What happens when your earning capacity goes down?

Passive income.

 

[jsasker007]

I have heard "experts" explain that saving 10% is a formula for retirement. The math doesn't work for me to listen to the "experts". At that rate you save one year for every 10 years you save---30 years of saving and you will end up with 3 years worth of money. How long will 3 years wages last someone? Like everything else, i will decide what to do for myself and the experts can "help" someone else. My bills are still getting paid and i don't plan on that one time check from the government to my family for $255.00---apparently that's all any of us are worth to the government after they pimped us out and took 1/3 of our money while we worked. I'm always willing to listen to ideas on better ways ways to do things but it's my decision on where i spend my money. Cash is king. Lots of lottery winners wind up back where they were before having a bunch of money(and lots of new "friends"). Many people don't have a clue on how to get anywhere in life. Look at the last year----sheeple running rampant. jmho.